Indiana’s New Law Blocks China-Owned Fufeng’s Real Estate Deal

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Indiana’s swift approval of House Bill 1183 in March, banning certain real estate sales to companies from China and other adversarial nations, has interrupted a real estate transaction with the China-owned company Fufeng, according to LaPorte County Assessor records. Fufeng was scouting for property in Indiana after being expelled from Grand Forks, North Dakota, following a U.S. Air Force memo that labeled the company a “significant threat to national security.”

Fufeng had succeeded in establishing a presence in North Dakota with a land acquisition before being driven out of the state. Fortunately, it was legislated out of Indiana—for the moment.

Fufeng’s brief incursion into Indiana raised alarms. What other activities are under the radar? The Indiana Economic Development Corporation (IEDC), an unelected modernized version of the traditional commerce department, plays a role in selecting and developing businesses in Indiana. The IEDC has facilitated the establishment of numerous China-owned companies in the state, including 25 currently operational, according to the IEDC’s general counsel.

The influx of China-based companies into Indiana hasn’t happened naturally but through orchestrated planning, with assistance from a nonprofit linked to the Chinese Communist Party (CCP). A contract displayed on the IEDC’s website reveals that it has been paying the America China Society of Indiana (ACSI) to broker dealings with China-owned businesses. The contract details IEDC’s aim to “identify and create a pipeline of [foreign direct investment] prospects in China” and organize travel itineraries, among other tasks.

It’s worrisome that a state contract seeks to fill a “pipeline” of China-owned firms interested in foreign direct investment, including acquiring U.S. land. According to the 2017 National Intelligence Law of the People’s Republic of China mandates, “any organization or citizen shall support, assist, and cooperate with the state intelligence work” and “state intelligence work institutions shall collect and handle the acts or acts of foreign institutions, organizations, and individuals….”

Essentially, China-owned companies operating in the U.S. are obliged to gather intelligence on the United States. Additionally, most large Chinese firms, particularly those permitted to expand into the U.S., include CCP members or party committees to ensure alignment with the CCP’s objectives.

Beyond concerns about Chinese companies establishing a foothold in the U.S., an organization like ACSI attached to state-level government raises additional issues. ACSI has conducted a series of influence operations and public relations events that may have compromised state-level decision-making through pressure or incentives.

You Will Know Them by Their Fruits

ACSI’s 2018 board of directors highlights the extent of IEDC’s exposure to CCP influence.

  • An IEDC member sits on the board, ensuring the IEDC is not only aware of but actively involved in ACSI’s activities.
  • Westfield Outdoors, among the China-owned firms ACSI introduced through the “pipeline,” is one of ACSI’s member sponsors, affecting the businesses ACSI recommends to Indiana.
  • Dr. Zao (Joe) Xu, founder of the Confucius Institute at Indiana University-Purdue University Indianapolis, was on the ACSI board until 2018. The U.S. government defunded Confucius Institutes (CI) following expert testimony identifying CI as part of a CCP influence operation. The Confucius Institute at IUPUI closed in 2019 along with nearly all others in the United States.

A board that includes Indiana government representatives alongside CCP-linked influencers, overseeing an organization whose members include China-owned companies with an intelligence mandate, is a formula for compromised decision-making.

The Deepening

In 2019, Indiana Governor and IEDC Board Chairman Eric Holcomb undertook a trip to China likely organized by ACSI “to renew the Indiana-Zhejiang sister-state relationship” established in 1987. The Indiana legislature has since outlawed sister-city agreements with China, forcing Holcomb to sign a bill criticizing the kind of agreement he had celebrated just five years earlier.

During this trip, Holcomb met with the president of the China People’s Association for Friendship with Foreign Countries (CPAFFC), described as the “‘public face’ of the CCP’s United Front Work Department.”

ACSI’s portrayal of CPAFFC as “focused on deepening international friendships” contrasts starkly with CPAFFC’s mission statement: “to make the foreign serve China.” This clear whitewashing is accessible on Wikipedia.

Why did Indiana’s governor confer with the chairman of the department of the CCP’s influence operation tasked with making other nations serve China? ACSI would have included the CPAFFC visit in the itinerary as part of its role in arranging IEDC’s China-bound trips under CCP direction. Holcomb may have assumed he was innocent in this “deepening” by a kind lady with a panda plate, but from the perspective of the CPAFFC and CCP, he declared his submission.

‘Mask Diplomacy’

During the early days of the Covid pandemic, China hoarded masks while companies like MyPillow shifted production to manufacturing masks for donations. When China decided to share, ACSI worked fervently to ensure Indiana participated in a geopolitical effort later termed “Mask Diplomacy.”

Mask diplomacy, an effort by the CCP to appear generous and deflect suspicions that Covid originated from the Wuhan Lab, involved distributing small quantities of masks for photo opportunities. Indiana was among the fortunate states to receive masks, as noted in a July 2020 news story on ACSI’s website.

In reality, this show was a favor the CCP owed, likely to trusted partners who had pledged allegiance to the CCP’s head of foreign submission (the CPAFFC) and could be relied upon to further this effort. For both the general public and selected recipients, the ostensibly selfless “favor” was an investment expected to yield a return.

To the recipients, it might have been more of an inconvenience. In context, 100,000 masks is a minimal number. The IEDC reported in 2020 with a certain grim enthusiasm that it managed the expenditure of $49 million on 27 million masks for the state, the smallest order being 1 million masks. The Chinese gift came with a detailed receipt – the only mention of this event on the IEDC’s website:

The IEDC likely had little use for such a small batch of masks, except to satisfy the CCP’s urge to give masks and take credit. However, in doing so, Indiana (through its contractor ACSI) accepted a public gift from the Zhejiang Provincial Government of the CCP valued at about $200,000. What are the chances the CCP would expect a return favor from this “investment”?

Far-Flung Fufeng

These instances are parts of a larger pattern of CCP-linked business development activities, seldom advertised by the IEDC. This might explain why the IEDC welcomed the disgraced Fufeng earlier this year after its expulsion from North Dakota by the Department of Defense.

Will the IEDC terminate its contract with ACSI for a “pipeline” of China-based companies in light of the new HB 1183 restrictions? Are other states also entangled with CCP influence operations lurking within unelected departments? Nearly two-thirds of U.S. states advancing similar anti-China bills might find they’re contending with hidden influence operations within their own administrations.

Vanessa Battaglia
Vanessa Battaglia
Vanessa Battaglia is a defense engineer with experience in designing software, hardware, and airborne systems for the Army, Navy, Air Force, Space Force, Special Operations Command, and the Federal Aviation Administration.

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